Monday, July 22, 2013

The SBA and Mimpsimus

mumpsimus

MUMP-suh-muhs

1. A view
stubbornly held in spite of clear evidence that it's
wrong.

2. A person who
holds such a view.

According to an
old story, a priest used the nonsense word mumpsimus (instead of Latin
sumpsimus) in the Mass. Even when told it was incorrect, he
insisted that he had been saying it for 40 years and wouldn't change it. The
expression is "quod in ore sumpsimus" ('which we have taken into the mouth').

_______________________________________________

TIP OF THE WEEK

You can not be a mumpsimus
about SBA loans.

Tax Code Section
179 allows small and medium sized business owners who acquire essential use
equipment to deduct the entire equipment cost in a single tax year. Thanks to
the Tax Relief Act of 2010 this
accelerated method of depreciation far outweighs in benefits the traditional
method of incremental tax deductions based on complicated depreciation schedules
of the assets acquired.

Under Section 179
of the Internal Revenue Code,
taxpayers that purchase new or used qualifying business property and place it in
service in 2013 can immediately deduct up to $500,000 of its cost.
Additionally, taxpayers can take advantage of the temporary additional "50%
bonus depreciation" deduction on qualified capital expenditures (new equipment
only). 50% bonus depreciation applies in addition to the Section 179 deduction.

But those benefits
won't be available for much longer; bonus depreciation is currently scheduled to
sunset in 2014 and the annual Section 179 deduction amount is scheduled to drop
to $25,000.

SBA loans can be
used to acquire equipment and be amortized up to the estimated useful life of
the asset being financed.

The
debenture rate is 3.15% but note rate is 3.20% and effective yield is a whopping
5.232%.

________________________________________________

AHEAD
OF THE YIELD CURVE

The
mumpsimus is that interest rates are starting to go
up.

The
Federal Reserve meets again next
week.

They
should make it very clear that it plans to hold its target interest rate near
zero for quite awhile.

A
few days after the Federal Open Market Committee meets, the Labor Department
will report on jobs for the month of July.

In
June, it was reported that employment increased by
195,000.

According
to the Federal Reserve Bank of
Atlanta, if the
participation rate stays steady, the unemployment rate will fall to 6.5% in
December 2014 if the economy adds around 185,000 jobs per month.

6.5
percent is the Fed's threshold, but not trigger, for raising the Fed's funds
rate. This is consistent with the Fed not raising rates until 2015 or
later.

So where then are
interest rates going?

Eurodollar futures
settle at a three- month lending rate that has averaged about 22 basis points
more than the Fed's target over the past 10
years.

Here is a summary
of what the market expects for Eurodollar futures based upon the pit-traded
prices at the Chicago Mercantile
Exchange:

DEC13-
0.33

DEC14-
0.61

DEC15-
1.32

DEC16-
2.32

DEC17-
3.20

DEC18-
3.83

DEC19-
4.23

DEC20-
4.48

What does all this
mean?

I don’t
know.

We
can not be a mumpsimus about interest rates.

__________________________________________OFF
BASE

A
mumpsimus should get off his rumpus.

Just
as many people fear things they shouldn’t, like vaccines, there are plenty of
everyday threats that deserve more of our attention. Take, for example, the
humble desk chair. Sitting at work, and in leisure, for hours at a time shaves
off more of your life than smoking cigarettes, according to a whole bunch of
studies ignored by just about everyone.

The
human body wasn’t built for the modern lifestyle of sitting all day, which leads
to increased rates of heart attacks, diabetes and death all around. Even
exercise and staying otherwise fit won’t protect against the dangers of the
chair (though a standing desk will).

Instead
of sitting, we should all lie down.

Studies
by NASA and other sleep researchers show that a 10-minute power nap boosts
memory, alertness, and mental and physical performance, and even reduces the
chance of heart disease. So where are the nap rooms at our offices? No,
seriously, where are they?